For the fiscal year ended March 31, 2015
For the transition period from to
Commission file number: 001-36199
RUTHIGEN, INC.
(Exact name of registrant as specified in its charter)
Registrant’s telephone number, including area code (707) 525-9900
Securities registered pursuant to Section 12(b) of the Exchange Act:
Securities registered pursuant to Section 12(g) of the Exchange Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ¨ No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The aggregate market value of the registrant’s voting and non-voting common stock held by non-affiliates of the registrant (without admitting that any person whose shares are not included in such calculation is an affiliate) computed by reference to the price at which the common stock was sold as of September 30, 2014, the last business day of its most recently completed second fiscal quarter, was $13,572,764.
As of June 5, 2015, the registrant had 4,804,290 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
TABLE OF CONTENTS
This Annual Report contains forward-looking statements as that term is defined in the federal securities laws. The events described in forward-looking statements contained in this Annual Report may not occur. Generally these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of our plans or strategies, projected or anticipated benefits from acquisitions to be made by us, or projections involving anticipated revenues, earnings or other aspects of our operating results. The words “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “plan,” “intend,” “estimate,” and “continue,” and their opposites and similar expressions are intended to identify forward-looking statements. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control that may influence the accuracy of the statements and the projections upon which the statements are based. Factors which may affect our results include, but are not limited to, the risks and uncertainties discussed in Item 1A of this Annual Report.
Any one or more of these uncertainties, risks and other influences could materially affect our results of operations and whether forward-looking statements made by us ultimately prove to be accurate. Our actual results, performance and achievements could differ materially from those expressed or implied in these forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether from new information, future events or otherwise.
As used in this Annual Report on Form 10-K, or this Annual Report, references to the “Company”, “we”, “us”, or “our” refer to Ruthigen, Inc.
Overview
We were incorporated in January 2013 as a wholly-owned subsidiary of Oculus Innovative Sciences, Inc. (“Oculus”) and operated as such until the completion of our initial public offering in March 2014. We were reincorporated from Nevada to Delaware in September 2013. We currently have no products approved for sale. We have been focusing on the commercialization of our lead drug candidate, RUT58-60, which is a broad spectrum anti-infective drug for the prevention and treatment of infection in surgical and trauma procedures. We have licensed the intellectual property rights underlying the RUT58-60 from Oculus pursuant to a License and Supply Agreement with Oculus.
Merger
On March 13, 2015, we entered into an agreement and plan of merger (the “Merger Agreement”) with Ruthigen Merger Corp., our wholly owned subsidiary (“Merger Sub”), and Pulmatrix Inc., a Delaware corporation (“Pulmatrix”), which provides for the merger of Merger Sub with and into Pulmatrix, with Pulmatrix surviving as our wholly owned subsidiary, and Merger Sub will cease to exist (the “Merger”). See our Current Report on Form 8-K dated March 13, 2015 for additional details related to the Merger.
We will issue shares of our common stock to the Pulmatrix equity holders in connection with the Merger as merger consideration and shares of common stock to certain lenders of Pulmatrix upon the conversion of bridge loans, such that the former Pulmatrix security holders will hold approximately 83% of Ruthigen’s post-merger shares. Although we are the legal acquirer and will issue shares of its common stock to effect the merger with Pulmatrix, the business combination will be accounted for as a reverse acquisition of Ruthigen by Pulmatrix under GAAP. In addition, at the effective time of the Merger, warrants to purchase shares of Pulmatrix common stock will be converted into and exchangeable for warrants to purchase shares of our common stock pursuant to an exchange ratio described in the Merger Agreement.
If the Merger is completed, Hojabr Alimi, our Chief Executive Officer and Sameer Harish, our Chief Financial Officer will resign from their current positions with the Company and continue to be employed by the combined company and have agreed to terminate equity grants previously made to them and will receive cash and restricted stock units pursuant to the new employment agreements Pulmatrix and Ruthigen entered into with each of Messrs. Alimi and Harish.
Pending the consummation of the Merger, the Merger Agreement permits us to scale down our operations as we deem necessary and requires us to scale back patient enrollment in our clinical trial of RUT58-60, our primary drug candidate, and it is currently anticipated that the combined company would focus its resources on the development of products within the scope of Pulmatrix’s current business plan. As a result, following the Merger, the combined company may seek to sell or assign its rights related to our current drug candidates, including RUT58-60.
Sale of Common Stock by Oculus
On January 8, 2015, we consented to the proposed sale of 2,000,000 shares of common stock held by our former parent, Oculus, to certain accredited investors (the “Oculus Share Purchasers”) at a purchase price of $2.75 per share subject to the occurrence of the closing of the Merger pursuant to a securities purchase agreement.
On March 13, 2015, Oculus entered into a securities purchase follow-up agreement with the Oculus Share Purchasers pursuant to which it reduced the number of shares of our common stock to be sold to 1,650,000 at a price of $2.75 per share, provided that 50,000 shares may be sold to one or more investors prior to closing. If the Merger does not close by August 13, 2015 or as may be extended up to 60 calendar days at Oculus’s discretion, there will be no obligation of the Oculus Share Purchasers to purchase the shares. Oculus will retain the voting rights to the 50,000 shares until and through the date of closing of the Merger. In the event that the closing of the Merger does not occur on or prior to September 30, 2015, the 50,000 shares of common stock will become fully tradable and full voting rights will transfer to the buyer(s) of such shares. On March 13, 2015, Oculus entered into a securities purchase agreement with several investors, pursuant to which the investors agreed to purchase the 350,000 shares of our common stock at a price of $2.75 per share. On March 23, 2015, this sale closed. Oculus retained the voting rights to the 350,000 shares until and through the date of closing of the Merger. In the event that the closing of the Merger does not occur on or prior to September 30, 2015, the 350,000 shares of Ruthigen common stock will become fully tradable and full voting rights will transfer to the purchasers of such shares. Voting restrictions applicable to shares of Ruthigen common stock held by Oculus are not affected and remain in effect until the closing of the Merger.
We are a biopharmaceutical company focused on pioneering new hypochlorous acid (“HOCl”), based therapies designed to improve patient outcomes and reduce healthcare costs associated with infections related to surgical procedures. Our lead drug candidates, including RUT58-60, are broad spectrum anti-infective products that we have been developing for the prevention and treatment of infection in surgical and trauma procedures. We are focusing development of our drug candidates for use initially to prevent infections in abdominal surgery due to the large addressable market, high rate of post-surgical infection associated with abdominal surgery, the high-impact opportunity that abdominal surgery offers it in the clinical trial setting to expose multiple internal organs to RUT58-60 at one time, and feedback from surgeons identifying post-surgical infection in abdominal surgery (relative to other surgeries) as a significant unmet medical need. We submitted our Investigational New Drug Application (“IND”), for RUT58-60 to the U.S. Food and Drug Administration (“FDA”), in early May 2014. In June 2014, our IND became effective thereby allowing us to begin human clinical testing of RUT58-60. In July 2014, we began human clinical testing of RUT58-60 in a 21-day skin irritation trial. In August 2014, we completed the skin irritation trial with 36 human subjects participating for 21 consecutive days. In October 2014, we initiated the Phase 1/2 clinical trial, and, in November 2014 we began patient enrollment in the Phase 1 portion of the Phase 1/2 clinical trial to evaluate the safety, tolerability, and potential efficacy of our lead drug candidate, RUT58-60, for use as an adjunct to systemic antibiotics in abdominal surgery and patient screening began at four clinical trial sites in the United States. To date, we have not received any reports of any serious adverse events. Pursuant to the Merger Agreement we may scale down our operations, including scaling back patient enrollment in our clinical trial to evaluate the safety of RUT58-60 within the abdominal cavity.
We believe that our drug candidates have the potential to significantly reduce the rate of post-surgical infections, reduce the use of systemic antibiotics that have proven to be ineffective against certain common resistant strains of bacteria, including methicillin-resistant staphylococcus aureus , or MRSA, and Vancomycin-resistant enterococcus, or VRE, reduce the negative side effects associated with the increasingly widespread use of antibiotics, accelerate post-surgical healing which should lead to quicker patient discharge from the hospital, and ultimately reduce hospital readmission rates.
We believe that our drug candidates will complement the paid for performance paradigm and they are designed to reduce the overall healthcare costs associated with post-surgical infections and improve hospital economics. We believe the benefits of its drug candidates will be significant as they:
We believe that our drug candidates have the potential to be used as a prophylactic therapy to prevent and treat infections, and may accelerate patient discharge from the hospital and ultimately lead to an overall reduction in hospital readmission rates.
The benefits of HOCl in preventing infection have been well-demonstrated in products with lower concentrations of HOCl than RUT58-60. To date, HOCl based products have only been cleared for use as medical devices for topical applications in the United States, Europe and certain other countries. Earlier formulations have not been able to achieve therapeutic indication status, primarily due to their lack of stability, sterility and effectiveness and therefore have been limited for use as topical applications. Historically, the lack of stability has posed a vexing problem to companies hoping to pursue HOCl products for therapeutic indications in invasive applications and has prevented these companies from being able to conduct the clinical trials necessary to prove whether HOCl is safe and effective for use as a therapeutic.
HOCl based products have been used successfully to prevent infection in topical applications and have been sold commercially since at least 2005 by other companies, generally as medical devices in the United States and Europe and for broader medical claims in certain other countries where approval has been granted. Several of these HOCl based products have been commercialized as medical devices by Oculus, our former parent company and the licensor of our technology. Through our license and supply agreement with Oculus, we have obtained exclusive rights to the RUT58-60 technology, as well as a proprietary method of manufacturing and producing HOCl with pharmaceutical potential by incorporating additional small molecules without sodium hypochlorite, the result of which increases the compound’s stability and biocompatibility, or the compound’s ability to remain in direct contact with internal tissues and organs. We believe our recent enhancements to the stability and biocompatibility of the compound will allow us to expand the use of HOCl so that it may be used in direct contact with internal organs. With these enhancements, we believe our lead product candidate will be able to meet the safety and efficacy standards that the FDA requires for the approval of a new drug. Obtaining approval of new drug by the FDA is a lengthy, expensive and uncertain process, and we may not be successful in obtaining approval. The FDA review processes can take years to complete and approval is never guaranteed.
There are approximately 30 million surgical and trauma procedures in the United States per year, approximately 7 million of which are abdominal surgeries, based upon market research.
If we are successful in receiving FDA approval for our drug candidates for the prevention of infection in abdominal surgery, we plan to pursue other types of surgeries, including cardiac, pulmonary and spinal, among others. Based upon data from preclinical studies conducted by us and data reported in third party publications, we believe that the safety and tolerability profile of our drug candidates, combined with its broad-range antimicrobial potency without specificity, offer a practical and unique approach to stem the high rate of hospital acquired infections and infections resulting from complications in surgeries and the increasing emergence of new antibiotic resistant bacteria that pose a significant risk to public health. We believe that our technology represents a significant innovation over existing uses of HOCl in topical applications and over systemic antibiotics for the prevention and treatment of infection in surgical and other invasive applications, and has the potential to raise the clinical bar for anti-infective products generally in the face of increasing headwinds.
We have focused much of our research and development efforts for RUT58-60 and other formulations on pre-clinical development and optimization. Our research and development team is working to further optimize the performance of our drug candidates by testing variations in the formulation and chemical components of RUT58-60. We also seek to further optimize the proprietary chemical formulation and manufacturing process that gives us reason to believe that RUT58-60 and other formulations may be able to be used in surgical applications.
Under our license and supply agreement with Oculus, we have exclusively licensed the HOCl technology relating to RUT58-60 and other formulations for commercialization in the United States, Europe, Japan and Canada. According to IMS Health, an information technology firm, these markets represented approximately 71% of the global medicines market in 2011. In parallel with our clinical development activities, we have conducted discussions with various pharmaceutical companies for potential partnership and collaboration activities for RUT58-60 in the United States, Canada, Europe and Japan. To date, we have not entered into any partnerships or collaborations for RUT58-60 and we cannot guarantee that we will be successful entering into any such arrangements on favorable terms, or at all.
Strategy
We were founded with the goal of being the first company to market HOCl based drugs for the prevention and treatment of infection in surgical procedures. We believe our technology may be able to reduce the number of post-surgical infections, reduce the increasingly widespread use of systemic antibiotics and the negative side effects associated with them, accelerate post-surgical healing which should lead to quicker patient discharge from the hospital, and reduce hospital readmission rates. We have agreed to scale back patient enrollment in our clinical trial of RUT58-60 pending completion of our proposed merger with Pulmatrix. In order to move forward with our strategy, the key elements to achieve our goals are:
HOCl Technology
We believe that HOCl, the active pharmaceutical ingredient in RUT58-60 and other drug candidates that we plan to develop in the future, has several potential benefits over systemic antibiotics, which are the current standard of care for the prevention of infection associated with surgical and trauma procedures, as described below.